Tag presalt

Brazil plans to auction off its largest-ever offshore oil discovery in October, selling exploration and production rights for a single prospect that is estimated to hold between eight billion and 12 billion barrels of recoverable crude oil at the country’s first presalt-bid round, regulators said Thursday.

The presalt region lies in deep Atlantic Ocean waters off Brazil’s southeast coast, with large deposits of oil trapped beneath a salt layer several miles below the surface.

Libra, as the prospect is known, is larger than the Lula field that started Brazil’s presalt craze when it was announced in 2007, said Magda Chambriard, director of Brazil’s National Petroleum Agency, or ANP. Lula is estimated to hold recoverable reserves of between five billion and eight billion barrels, Ms. Chambriard said.

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President Dilma Rousseff expanded by 68 percent the amount of acreage offered in Brazil’s first oil exploration auction since 2008 in a move that will help relieve pent-up demand and increase the government’s auction revenue by raising as much as 10 billion reais ($4.9 billion).

Brazil will auction 289 licenses onshore and off the coast of northeastern Brazil on May 14 and May 15, Marco Antonio Almeida, the secretary of oil and natural gas at the Energy Ministry, told reporters in Brasilia today. Brazil also plans to auction areas in the so-called pre-salt region that holds the country’s largest deposits on Nov. 28 and Nov. 29 and shale onshore gas blocks on Dec. 11 and Dec. 12, he said.

Petroleo Brasileiro SA (PETR4), the world’s biggest producer in deep waters, has discovered high-quality oil in the Ceara and Sergipe basins, where new blocks will be available. The geology along Brazil’s equator also mirrors recent discoveries near the coast of Africa.

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Petrobras aims to be the world’s largest oil producer as soon as 2015, according to the Brazilian energy group’s chief financial officer.

A series of huge recent “pre-salt” finds off the coast of Brazil have transformed the fortunes of the company and catapulted Brazil into one of the world’s leading energy and economic powerhouses.

In one of his first interviews with a British newspaper, Almir Guilherme Barbassa told the Guardian that Petrobras would be one of the biggest beneficiaries of new legislation that will grant the company a minimum 30% stake in each new discovery and will also be the lead operator in all new projects.

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Petrobras, Brazil’s national oil company, has raised about $70bn in the biggest share issue in corporate history, according to a person familiar with the operation.

The person said on Thursday night that demand for the new shares was double that amount.

The price for new voting shares was set at R$29.65 on Thursday compared with the closing price of R$30.25 in São Paulo, which rose 1.9 per cent during the day in frenetic trading versus a wider market that was up just 0.69 per cent.

New non-voting shares – the kind that are more heavily traded – were priced at R$26.30, compared with the closing price of R$26.80.

Of the proceeds, about $43bn would go to the government, the company’s majority shareholder, in exchange for the rights to 5bn barrels of oil in Brazil’s newly discovered pre-salt oilfields, so called because they are trapped under several kilometres of seawater, rock and a hard-to-penetrate layer of salt.

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FOUR years ago Brazil struck oil—up to 350km (220 miles) offshore and buried under deep water and thick layers of rock, sand and corrosive salt. In places, the oil fields are 7km below the surface, so getting the black stuff out was always going to be hard. Now it looks like finding the funding will be tricky too.

On September 1st, two months later than planned, Brazil’s government made public the price it will demand for an estimated 5 billion barrels, mostly in the Franco field off the coast of Rio de Janeiro. Petrobras, the national oil company that was partially privatised in 1997 (Brazil’s government still owns 40% and a majority of voting rights), will have to pay $8.51 a barrel. Analysts frown that $6 would be more reasonable. Oil is $74 a barrel, on the surface, but is worth much less underground.

Petrobras is Latin America’s largest company by market value, but it is short of cash and its feud with the government has helped to wipe 25% off its shares since the start of the year. Setting the price for those reserves is the first step in a complex plan to raise badly needed capital. It will pay in shares, not cash. This will allow the government to bolster its stake. On September 30th Petrobras is expected to hold a rights offering, in which minority shareholders can participate. It was hoping to raise $25 billion, but that will now be hard.

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Petroleo Brasileiro SA, Latin America’s largest company by market value, agreed in a meeting today on a price for oil reserves that it plans to buy from Brazil’s government in exchange for new stock, according to an Energy Ministry official briefed on the negotiations.

Petrobras, as the state-controlled oil producer is known, may give the price in a regulatory filing today after a meeting of the National Council for Energy Policy, said the person, who declined to be identified because an official announcement hasn’t yet been made. The official didn’t know what price Petrobras and President Luiz Inacio Lula da Silva agreed on.

Brazil will set an oil price “in the middle” of a $5-to- $12 a barrel price range after studying two reserve studies by independent auditing firms, Senator Delcidio Amaral said today in a telephone interview. Brazil will set a “fair” price for the oil, Lula said today during a speech in Brasilia.

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Brazil has a sunken-treasure problem. The discovery three years ago of a huge offshore stash of oil unleashed a gusher of nationalist euphoria. At somewhere between 9 billion and 15 billion barrels, it was the largest find in the Western Hemisphere in more than a quarter century. President Luiz Inácio Lula da Silva hailed the find as a ticket to Brazil’s “second independence,” and called on the country’s legislators to tighten state control over the oil industry.

Since then, things have become more difficult. Brazil’s treasure lies deeper (4.5 miles) and farther from shore (200 miles) than any oil being commercially exploited today. To tap that undersea wealth, state oil company Petrobras says it needs cash up front: some $224 billion over the next five years. It has planned a massive stock offering for September. Problem is, the complicated financial transaction will only add to Petrobras’s already heavy debt load (34 percent of net assets), which could move ratings firms to downgrade the company. That would drive up borrowing costs and sour the deal. Brazil could share the burden by calling on international oil majors as risk investors, but that would mean easing its grip on the industry. In the run-up to the Oct. 3 presidential elections, that’s not happening.